Wall Street firms catch up to Buffett enthusiasm on Japan as Nikkei keeps hitting records

By Steve Goldstein and Barbara Kollmeyer

Critical information for the U.S. trading day

Japanese stocks were back in the spotlight from top Wall Street firms, as the benchmark Nikkei 225 crossed the 35,000 mark for the first time in nearly 34 years.

The Nikkei 225 JP:NIK ended up 1.8% to 35,049.86, in yet another strong showing for the Japanese index. The index has gained 5% this year, versus the virtually flat performance for the S&P 500. Over the last 52 weeks, the Nikkei has stormed 33% higher, surprising most everyone except Warren Buffett, who started making his big push in Japan in 2020.

"This owed primarily to the weak yen and a tailwind from risk-on sentiment in global stock markets after the Fed paused interest rate hikes," say strategists at JPMorgan led by Rie Nishihara.

Nishihara points out that companies are starting to announce larger wage increases than last year, but that the country has yet to escape deflation. But the key question is whether these wage increases then show up in selling prices.

Bank of America strategists led by Masashi Akutsu also point to growth in real wages as a catalyst during the first half of the year. "Rising real wages are leading to a recovery in consumer sentiment, making it easier for companies to raise their prices and contributing to improving margins and ROE," said Akutsu.

Both pointed to a Nikkei survey suggesting 5% wage growth this year, above the 3% rise last year.

JPMorgan's Nishihara also said companies are become more conscious of the cost of capital and share prices, including through managed buyouts and mergers and acquisitions. She also flagged a new government tax-free stock investment system that fosters expectations for an inflow of funds from individual investors.

The Bank of America strategists say Japanese stocks will rise in the first half, then move sideways from July to September amid a possible dissolving of the Diet, and then rise again after the U.S. presidential election in November.

They say it makes sense to hold value stocks with high dividend yields, including Mitsubishi (JP:8058), Mitsui (JP:8031), Marubeni (JP:8002) and Sumitomo (JP:8053)- all holdings of Buffett's Berkshire Hathaway.

The markets

Stocks DJIA SPX COMP are creeping higher as investors weigh up CPI data, with Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y flat. Crude oil (CL.1) is up 2% as investors monitor Middle East unrest - an oil tanker in the Gulf of Oman was boarded early Thursday by the Iran navy - and gold (GC00) is up $12 to $2,039.20/oz.

   Key asset performance                                                Last       5d      1m      YTD     1y 
   S&P 500                                                              4,783.45   1.67%   1.62%   0.29%   20.50% 
   Nasdaq Composite                                                     14,969.65  2.59%   1.60%   -0.28%  36.94% 
   10 year Treasury                                                     3.991      -0.75   6.96    11.04   54.49 
   Gold                                                                 2,037.60   -0.65%  -0.67%  -1.65%  7.23% 
   Oil                                                                  71.74      -0.91%  0.13%   0.57%   -8.33% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Consumer price inflation rose 0.3% in December, above an expected 0.2%, and jumped to 3.4% from a 3.1% prior. Core CPI, minus food and energy, slowed to 3.9%, slightly above forecasts from 4%. Weekly jobless claims dipped in early January. Follow along with our Live Blog coverage

Cleveland Fed President Loretta Mester will appear on TV at 11:30 a.m. and Richmond Fed President Tom Barkin will speak at 12:40 p.m.

Eleven bitcoin exchange-traded funds, including Grayscale Bitcoin Trust GBTC, Blackrock's iShares Bitcoin Trust and ARK 21Shares Bitcoin ETF will being trading on Thursday after a Securities and Exchange Commission green light and a chaotic 24 hours for the agency. Bitcoin prices (BTCUSD) are up to around $47,206.

Chesapeake Energy (CHK) is buying Southwestern Energy (SWN), at a slight discount to Wednesday's close, as the deal talks had been previously reported.

More tech job cuts - on the heels of Amazon.com (AMZN), Alphabet's Google (GOOGL) reportedly plans to axe hundreds of workers.

Hertz (HTZ) is downsizing its EV fleet by about 20,000 vehicles, citing weak demand and high damage expenses.

Citigroup (C) has set aside $1.3 billion to cover risks related to turmoil in Argentina and Russia.

Best of the web

Does Apple, Verizon or 'Fortnite' owe you money? Here's how to check.

Fast-fashion retailer Boohoo put 'Made in U.K' label on overseas garments

Rising carbon dioxide in the air? It must be a China recovery

The chart

With equity and house prices rebounding from 2022 declines, household balance sheets have firmed up, notes a team at Goldman Sachs led by chief economist Jan Hatzius. And they say total household net worth as a share of disposable income is now at all-time highs.

While those past stock and house-price declines dragged on consumption growth in 2023, the turnaround could boost spending this year. "We expect gains in household wealth to boost quarterly annualized consumption growth by an average of 0.4 pp [percentage points] in 2024," said the Goldman team.

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

   Ticker  Security name 
   TSLA    Tesla 
   NVDA    Nvidia 
   INFY    Infosys 
   MARA    Marathon Digital 
   NIO     Nio 
   GME     GameStop 
   AAPL    Apple 
   COIN    Coinbase 
   AMC     AMC Entertainment 
   AMZN    Amazon.com 

Random reads

What space really smells like.

Heiress seeks 50 random people to help her give away $27.4 million.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

-Steve Goldstein -Barbara Kollmeyer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

01-11-24 0932ET

Copyright (c) 2024 Dow Jones & Company, Inc.